Why a Roth IRA is Crucial For Financial Success

Hi! I’m Arushi Yagnik. This is my first blog and it will be on what a Roth IRA is and why starting one in your teenage years can be financially beneficial in the future. 

Retirement might seem like the last thing you need to think about as a teenager. Between school, part-time jobs, and trying to figure out what you actually want to do with your life, saving for your sixties isn’t exactly top of mind. Well the truth is your teenage years are one of the most powerful times to start investing—and one of the smartest ways to do that is with a Roth IRA.

So, what is a Roth IRA? It’s a retirement account where you contribute money you’ve already paid taxes on—known as “after-tax” income. That money gets invested (usually in stocks, bonds, or index funds), and over time, it grows. The best part? When you withdraw the money in retirement, you don’t pay any taxes on it, not even on the growth. That means if your $1,000 investment turns into $20,000 over a few decades, you get to keep every cent of it.

Here’s why this matters. When you’re young, you have the one thing investors are always chasing—time. The earlier you invest, the longer your money has to grow through compound interest. For example, investing $1,000 at age 16 with an average return of 7% per year would turn into over $21,000 by age 65. And what happens if you add a few hundred dollars each year for a while? The numbers become even more impressive.

You might be thinking, “That’s great, but I don’t have a full-time job.” The good news is that you don’t actually need one. All you need is earned income which can be money you made from doing real work, whether that’s babysitting, tutoring, working at a coffee shop, or running an online store. As long as it counts as taxable income, you can contribute it to a Roth IRA. If you’re under 18, your parent or guardian can help you open a custodial Roth IRA, which they’ll manage until you’re legally an adult.

For example, I have been working alongside my dad in his part time photography business for 3 years. Every gig that I go to I earn 100 dollars for taking pictures, helping him set-up, etc. And simply, if I don’t go to the gig, I don’t get paid, which is just like a real job. Instead of getting the money sent or handed to me, my parents put the 100 dollars in my Roth IRA account which continues the growth of my money. So, whether it is baby-sitting, walking your neighbors dogs or selling clothes online, you can easily start your own Roth IRA account and begin growing money for the future. 

It might not be the most exciting thing you’ll ever do, but starting a Roth IRA in your teens is a serious advantage. Most people don’t start saving for retirement until their late twenties or even thirties—by then, they’ve already lost a decade or more of potential growth. Starting early gives you a head start that’s almost impossible to make up later.

So even if retirement feels far away, think of your Roth IRA as a quiet investment in your freedom—freedom from financial stress, from working longer than you need to, and from relying on someone else to take care of your future. It’s not super flashy but it’s one of the smartest financial decisions you can make right now.

Arushi Yagnik

June 14, 2025